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Executive Summary

FDA would be authorized to suspend distribution of all of a firm's generic drug products for three years if the firm were found guilty of fraud or other illegal acts that compromise the ANDA review process under Rep. Dingell's (D-Mich.) "emergency" generic drug legislation. A summary of the bill says the measure "creates suspension authority covering distribution of all generic drugs." However, the bill provides an escape clause for manufacturers that "can prove that the drugs were unaffected by the illegal acts or that audits and other reforms have eliminated the need for suspension." Dingell is scheduled to introduce the legislation on May 10. The bill to expand FDA's enforcement powers is the product of Dingell's Energy & Commerce/Oversight Subcommittee's nearly three-year investigation into the agency's regulation of the generic drug industry. The summary states that the suspension authority may be exercised by FDA when it detects a "pattern or practice" of illegal activity by a firm "in connection with the development, approval, manufacturing or distribution of two or more generic drugs." However, "no suspension [is] possible" if it is shown that the "offenses or acts did not influence the development, approval, manufacturing or distribution of that drug." Authority to suspend distribution is further limited by a requirement to provide due process, by potential FDA concern for public health interests, and by authority to withdraw a suspension order. In suspending distribution of a firm's generic drugs, FDA must provide notice and hearings but also may "conduct discovery" proceedings, the summary states. A suspension may be waived "on health grounds," and it may "be withdrawn if the suspended drugs have been satisfactorily audited to assure they meet FDA standards" and the company "presents evidence of ownership, management, and operational reforms to satisfactorily remedy the pattern or practice" of illegal activity. The bill also authorizes FDA to withdraw ANDA approvals due to bribery and fraud. "Approvals shall be withdrawn if the application was influenced by bribery, gratuity, fraud or false statement" or if the ANDA "was the subject of attempted bribery, gratuity, fraud or false statement," the summary states. As in the Administration's debarment proposal, the Dingell bill provides for civil monetary penalties of up to $5 mil. for companies and $100,000 for individuals. The maximum corporate fine contrasts with the $1 mil. civil penalty authorized under Dingell's 1988 drug diversion law. Regarding criminal enforcement, the legislation deletes the requirement that FDA must notify defendants before the agency can recommend that the Justice Department pursue criminal prosecution of firms that violate the FD&C Act. According to the summary, offenses that can trigger the prescribed penalties are "(1) false statements; (2) bribery or gratuity; (3) destruction of records; (4) failure to make obligated disclosure of a material fact; (5) obstruction of investigation; (6) use of a debarred person; (7) as a debarred person, subjecting another person to sanction; or (8) endangering the public health or safety through knowing violation" of the FD&C Act. Like the diversion act, Dingell's generic bill provides a reward to whistleblowers amounting to the lesser of $250,000 or one-half the penalty "imposed and collected." Under the bill, individuals may be debarred permanently from participating in the FDA review and approval process if they are convicted of a felony relating to that process or named as unindicted coconspirators. FDA is required to publish a list of debarred individuals and companies. The minimum debarment period is three years for individuals and companies. "Debarment may be terminated at the end of the minimum period upon application to the secretary if the secretary finds no basis for its continuation and there are reasonable assurances that actions will not recur," the summary notes. "Debarment" authority is provided so that the agency, in the words of the summary, may "refuse to accept, review or approve generic drug [505(j)] applications for companies under specified circumstances." FDA is authorized to "temporarily withhold generic drug approvals," according to the summary, if it "finds probable cause to believe a firm or individual has engaged" in any of three acts: "(1) bribery or attempted bribery of an HHS employee in connection with a generic drug, (2) a pattern of false statements or representations relating to any generic drug, or (3) knowing multiple violations of the [FD&C] Act which have seriously endangered the public health or safety." Authority to withhold approvals is limited to 18 months but may be extended for up to 18 additional months "if the firm or individual has been indicted." Like the Bush Administration's proposed legislation ("The Pink Sheet" April 30, p. 3), the Dingell bill distinguishes "mandatory" from "permissive" debarment. Debarment of "firms and/or individuals" is mandatory "for felony criminal conviction in connection with development or approval of generic drugs," the summary states. FDA is permitted to debar firms and/or individuals for "(1) a criminal conviction in connection with an activity relating to the development or approval of generic drugs; (2) a criminal conviction for bribery, fraud or similar crime; (3) a criminal conviction related to obstruction of justice; (4) being named as unindicted coconspirator for such crimes, or (5) knowing use of a debarred person," according to the summary. As expected, the Dingell legislation will reauthorize the HHS Inspector General to enforce felonious violations of the FD&C Act. The summary notes that the bill "gives the Inspector General authority to investigate false statements made to the FDA, fraud or abuse involving any program administered by the FDA, drug diversion and counterfeiting, FDA employee misconduct, and certain other matters." The Inspector General traditionally has had authority to investigate criminal violations by FDA employees or outside recipients of agency funds. Last summer, in the midst of the generic drug crisis, HHS Secretary Sullivan extended that authority to investigations involving FDA-regulated parties who have not received funds but committed felonies in violating the FD&C Act. He rescinded that authority in December under pressure from the Justice Department ("The Pink Sheet" Jan. 8, p. 12). Also as anticipated, the legislation includes a sunshine provision so that information contained in ANDAs is open to scrutiny both by congressional oversight staffs and by sponsors of competing ANDAs that wish to monitor whether parallel applications are being treated in an equitable manner by the agency. The summary states that the bill "explicitly gives appropriate committees of Congress access to trade secret material at the FDA and requires the secretary to make public limited information concerning applications for generic drug approvals." Oversight Subcommittee Ranking Republican Bliley (Va.) is the first cosponsor of the legislation. In a May 4 memorandum to Energy & Commerce Committee members, Chairman Dingell and Bliley asked that those who wish to be added as cosponsors sign onto the bill by May 9. The measure differs from the Administration proposal in that it applies only to generic drug products. Dingell restricted the bill's scope to facilitate quick enactment during the current Congress -- although the congressman is in a race with time. The memo states that although "the subcommittee's generic drug investigation is not yet complete," it is "clear that legislation should be enacted this Congress." Dingell and Bliley noted that "there have been 13 criminal convictions arising from the investigation and additional charges are expected in the coming months." In addition, "more than 100 products have been recalled or withdrawn, and five of the top 10 generic drug firms (ranked by number of approved applications) have been implicated in corruption, fraud or false statements." The bill "clarifies Congress' right to trade secret material in the FDA's possession and creates limited sunshine for the generic drug approval process," the legislators wrote. "The subcommittee's investigation was hindered by the substantial redaction of material" by FDA.

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